Camden Fine's blog

Category Archives: Small Business

Rarely do I pause to share recommended reading, but a new feature in this month’s Independent Banker magazine is worth it. The “Psychology of Money” feature in the December issue is some of the finest journalism on banking and finance that I’ve come across in some time—and I’m proud to say it came from ICBA.

The feature story from writer Kelly Pike probes how irrational emotions and biases drive our relationship with money, and how community banks can use that information to serve their customers and better their business. The story also examines various banking offerings and how customers react depending on what’s happening inside their mind.

For instance, relationship bankers can be a lifeline of support to customers who are dealing with financial stress, family problems and even fraudulent schemes that feed on their emotions. Meanwhile, incentive offers can fall flat when customers believe they’re too good to be true.

“Money can make people do strange things,” one Kentucky community banker says in the piece. That is certainly an understatement.

The newest issue of Independent Banker is online and in the mail, so I encourage you to take a look when you have a spare moment. It’s always good to see community banking through different lenses to gain a new perspective. One thing is for sure: you’re not going to find this kind of content anywhere else.

It’s something ICBA and the community banking industry say all the time: community banks are the nation’s leading small-business lenders. And the numbers back it up. While community banks make up less than 20 percent of the banking system’s assets, they dole out more than half of its small-business loans.

Still, some small businesses continue to test their alternatives: megabanks, credit unions, and now online lenders. The latest set of numbers shows that these businesses should stick with a community bank.

According to a new study from seven Federal Reserve Banks, small businesses that apply for loans with community banks are the most successful and most satisfied.

Here’s what the study found:

Community banks were the most likely to make a loan, extending financing to 76 percent of loan applicants while large banks approved just 58 percent.

Community banks also had the highest satisfaction scores, with 75 percent reporting that they were satisfied with their overall experience, compared with scores of 56 percent for credit unions and 51 percent for large banks.

While online lenders had the second-highest rate of approval at 71 percent, just 15 percent of borrowers said they were satisfied with the experience.

Of the firms that were dissatisfied with their experience with online lenders, 70 percent cited high interest rates and 51 percent reported unfavorable repayment terms.

With the amount of blood, sweat and tears that goes into launching a startup or expanding a small business, entrepreneurs should know that they have a partner in their local community bank. That is more important now than ever before, as demonstrated in a 2014 ICBA study that found that 41 percent of Millennials say they are very interested in starting up their own business.

So community bankers, let’s continue to spread the word about the importance of our industry in getting small businesses off the ground and taking our economy along with them. It’s an important message that everyone needs to hear, and now we have even more data to back it up.

Congress is an intentionally deliberative body. It was structured by our founders to ensure collective participation in shaping government policy, and sometimes that allows certain factions to disrupt the legislative process purely for their own self-interest. Such is the case with the retail industry sidelining the debate over data security by resuscitating tired and largely settled complaints over the transition to EMV chip technology.

As ICBA recently testified before the House Small Business Committee, community banks are in a good position to help small businesses make the switch to EMV technology. The transition itself has been underway since 2011. And the Oct. 1 liability shift has come and gone with banks and merchants diligently moving toward implementing EMV.

But rather than entering into a substantive dialogue about the limitations of chip technology and collaborating on further improving consumer security in an era of data breaches and cyber-threats, retail industry lobbyists have instead fixated on EMV quibbles and attempted to re-litigate the failed Durbin Amendment debit interchange price controls. To avoid the public spotlight on their own costly security lapses, retailers are serving red herring.

Don’t bite. Here are the facts: EMV is a positive step for consumers, but it is simply not a panacea for payment card fraud. While counterfeit card fraud will be successfully mitigated when a critical mass of card issuers and merchants migrate to EMV, fraudsters will shift to other fraud, such as online card fraud. The financial industry is, however, pioneering multiple layers of security technologies, such as end-to-end encryption and tokenization, to protect cardholder information in transit and online transactions. Meanwhile, Congress can take action now—I mean right now—to address the scourge of massive retailer data breaches affecting consumers and the broader economy.

The Data Security Act (H.R. 2205), introduced by Reps. Randy Neugebauer (R-Texas) and John Carney (D-Del.), would implement uniform national data-security standards in place of the current patchwork of state laws. This national standard for all entities that handle sensitive financial data—including merchants—would require robust data-security processes while at the same time being scalable and flexible to the size and risk profile of covered entities. In other words, the corner mom-and-pop deli won’t have the same level of scrutiny as multichannel retailers with massive databases of consumer information, like Wal-Mart, Target or Home Depot. But consumers themselves will be better protected than ever before.

Lawmaking is a justly deliberative process, but it should not be diverted by misleading and disingenuous arguments. If merchants do not want to meet the same kinds of security standards that have worked well for financial institutions, they should explain why they should not have to. But let’s not stall Congress with red herring distractions when, faced with rampant cyber-crime and data breaches, we have much bigger fish to fry.